In Shops

Expert Opinion: Gift Cards can provide multiple revenue streams

Retailers have been using gift cards for many years but recently the multi-stream benefits that can be returned are urging retailers to look at this as a positive revenue earner and a loyal tool for consumers.

Retail in Asia spoke with Shoney Yuan, VP Business Development, Asia Pacific, Stored Value Solutions (SVS) to find out more.

RIA: What makes gift cards so popular amongst retailers?

SY: Gift cards have appeal across all age groups. Compared to cash, it provides a more personal touch than just giving cash. Compared to actual merchandise, it gives the choice to the recipient while providing the gift giver with a peace of mind on product selection. That is why Gift cards have been the most requested gift, 5 years in a row in the mature markets such as the US and the UK.

Also Gift cards provide multiple revenue streams. First is called Float. Retailers can earn interest on the original purchase amount of the card before the card gets redeemed. The typical gift cards are redeemed between 45 and 60 days after the purchase. Secondly, it generates Lift, which is the value the customer spends above the face value of the card. Lastly, approximately 3 – 4% of all cards never get redeemed before cards expire. These funds can be retained by the retailer afterwards.

Overall a gift card program can contribute significantly to the top line sales growth, if executed well. On average, SVS clients enjoy a compound growth rate of 67% in a 5-year period.

RIA: How is gift card different from open-looped prepaid card? Are there any pitfalls to look out for?

SY: Gift Card is also called close-looped prepaid card. Unlike open-looped product which emphasizes universal cross-merchant acceptance (for instance Visa MasterCard branded), a closed-looped product can only be used at a particular brand. As much as being an alternative payment method, it is a consumer engagement tool for brands to drive footfall, incremental sales and customer loyalty. Other benefits include a much lower processing fee as opposed to the merchant discount fee charged by the issuer of open-looped prepaid cards, which can be anywhere between 2% and 3% per transaction.

There really isn’t any pitfall. If there is one callout, we require to integrate to retailer’s POS system to enable seamless operational process and real-time business insights. This requires retailers to have same POS system across of its branches.

RIA: Are digital cards taking over from physical cards or can they co-exist and work together?

SY: According to SVS Gift Card survey in 2014 in the US, 69% of consumers still prefer to receive a plastic gift card. 37% of gift card recipients have redeemed their gift cards via email or mobile phone. Consumers are showing growing interest in digital card because of its convenience and “cool factor.” Particularly in China, we see an upward trend in consumer adoption of digital cards in the past 6 to 12 months, with more merchants accept a barcode rendered on the mobile devices at the physical store. Of course, physical cards will still exist for a long period of time, but China will leapfrog the western world on mobile adoption when relating to Gift card. This is a force that needs to be reckoned with.

RIA: How can these gift cards create trackable customer loyalty data?

SY: SVS has developed a platform that is centered on Customer Enablement with real-time information stored in the cloud. We offer store level details on card sales, usage, and lift by distribution channel, whether it is in-store, online or through a mobile app. It provides retailers with the ability to optimize campaigns real time based on performance results.

RIA: What are the future trends embracing the online gift card business?

SY: We see a greater convergence between offline and online. Retailers need to adapt to this as we have as a retail solution provider. To win today’s fickle and on-demand customer, retailers need to know what they expect, and have the ability to reach them with the right interaction, whether they are on the go, at home or at work. Gift card as a consumer engagement tool lies at the heart of the effort to build the understanding in a much contextualized fashion. SVS is currently working with leading digital service providers in China as a part of our endeavor to embrace this rapidly growing trend.

For more information visit the SVS/Stored Value Solutions website.

Follow Retail in Asia on Facebook, Twitter and LinkedIn.

Get our top stories delivered to your inbox:

 

Stay ahead
Subscribe for free!
Register now
Stay ahead